2018 (6) TMI 1274 - AT - Income Tax

Tribunal directs reassessment for deduction claim under Income Tax Act | Fair evaluation emphasized

The Tribunal set aside the decision of the Commissioner (Appeals) and directed the Assessing Officer to reconsider allowing the deduction claimed under ... Denial of deduction u/s 54 - income offered in the revised return of income - Held that- There is no dispute to the fact that both the conditions imposed under section 139(5) stood complied in case of revised return of income filed by the assessee. There is no bar / restriction in the provisions of section 139(5) of the Act that the assessee cannot file a revised return of income after issuance of notice under section 143(2) of the Act. It is trite law, the assessee can file a revised return of income even in course of the assessment proceedings, provided, the time limit prescribed under section 139(5) of the Act is available. That being the case, the revised return of income filed by the assessee under section 139(5) of the Act cannot be held as invalid. When the assessee has made a claim of deduction under section 54 of the Act, it is incumbent on the part of the Departmental Authorities to examine whether assessee is eligible to avail the deduction claimed under the said provision. The Departmental Authorities are not expected to deny assessee’s legitimate claim by raising technical objection. In view of the aforesaid, we set–aside the impugned order of the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer for examining and allowing assessee’s claim of deduction under section 54 of the Act subject to fulfillment of conditions of section 54 of the Act. Grounds raised are allowed for statistical purposes. Issues:Denial of assessee's claim of deduction under section 54 of the Income Tax Act, 1961.Analysis:The dispute in the present appeal revolves around the denial of the assessee's claim of deduction under section 54 of the Income Tax Act, 1961. The assessee initially filed a return of income for the assessment year, declaring total income. Subsequently, a revised return was filed under section 139(5) of the Act, claiming a deduction under section 54 towards investment in a new residential house. The Assessing Officer rejected this revised return, stating it was invalid since it was filed after the issuance of a notice under section 143(2) of the Act.The learned Commissioner (Appeals) upheld the disallowance of the deduction claimed under section 54, agreeing with the Assessing Officer's reasoning. The assessee argued that the revised return was filed within the prescribed time limit and should be considered valid. The Departmental Authorities contended that the revised return was invalid.Upon reviewing the submissions and the facts, it was noted that the Assessing Officer accepted the rental income and long term capital gain offered in the revised return but denied the deduction under section 54. The Tribunal found the Assessing Officer's selective approach unjustified. The Tribunal highlighted that under section 139(5) of the Act, an assessee can file a revised return before the expiry of one year from the end of the relevant assessment year or before completion of the assessment, whichever is earlier. There is no restriction on filing a revised return after the issuance of a notice under section 143(2) of the Act.The Tribunal also criticized the learned Commissioner (Appeals) for not examining the assessee's claim of deduction under section 54 and failing to follow the precedent set by the Hon'ble Supreme Court. The Tribunal emphasized that Departmental Authorities should assess the eligibility of the assessee for the claimed deduction without raising technical objections. Consequently, the Tribunal set aside the order of the learned Commissioner (Appeals) and directed the issue to be reconsidered by the Assessing Officer for allowing the deduction under section 54, subject to the conditions of the Act.In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, emphasizing the importance of properly evaluating the assessee's claim of deduction under section 54 of the Income Tax Act, 1961.